Chartwell wins fight to sell cheap

Investment giant Fidelity Investments has backed down on its attempt to ban IFA Chartwell Investment Management from handing half of the renewal commission it pays back to clients to boost their investments.

A number of IFAs now pay some or all of the up-front commission they get back into their clients' investments. But most keep hold of the commission paid to them each year from their customers' savings plan.

Chartwell is one of the few to hand back not only the up-front commission, but half of the annual renewal commission too, in exchange for paying a flat £20 up-front fee. This can make a big different to investors. Assuming £50,000 grows by 7% a year, it would mean savers get an extra £1,848 over ten years.

Fidelity had threatened to stop paying any renewal commission to Chartwell if it continued with the practice, arguing that if smaller IFA firms are forced by competition to rebate their renewals it could send them to the wall.

Fidelity executive director Paul Kafka said: 'In the short term, it may seem as if it is restricting choice for investors. But we think it will be damaging if this results in the closure of a number of intermediaries unable to support the administrative costs of the rebate.'

But the Consumers' Association is not happy with this explanation. Simon Barnes, senior researcher for the association's Which? Magazine said IFAs should be free to rebate annual commission. He added: 'Why should anyone want to knock that? It's competition.'

Now Fidelity, through pressure from the CA and the Office of Fair Trading (OFT) has had to agree to allow Chartwell to continue running business in its own way. Its practice is not detrimental to customers' investments, to the contrary it is beneficial for consumers and to the market.